Oil producer EnQuest in talks to farm out North Sea development stake

(Reuters) - EnQuest Plc (ENQ.L) said it was in talks with Israeli conglomerate Delek Group Ltd (DLEKG.TA) to farm out a 20 percent interest in the Kraken development in the UK North Sea, as the London-listed oil producer explored ways to cut its debt.

If the deal goes through, Delek would advance $20 million to EnQuest for a period of up to 5 years at an annual interest of 3 percent, the independent producer said.

The amount shall be returned to Delek in the event that its costs are not covered by revenue within 5 years from the completion date, EnQuest said.

Scotland-based EnQuest has been considering farm-outs and potential asset sales after coming under financial strain due to the sharp drop in oil prices.

EnQuest raised its interest in the Kraken oilfield to 70.5 percent earlier this year after buying part of First Oil's stake in the field. It said then that it expected to spend another $90 million before its first production, expected in 2017.

EnQuest, which specialises in maximising oil output from old fields using new technology, said on Monday Delek would bear its share in the project capital expenditure from Jan. 1, 2016.

(Reporting by Esha Vaish in Bengaluru; Editing by Gopakumar Warrier)